Non spouse beneficiaries

[Guest LSULLIVAN]

Is there a regulation (new or old) that states a non spouse beneficiary must distribute the assets from the deceased retirement account within 5 years?

If so,

Does this apply to a spouse beneficiary as well?

What happens if the distribution is not made within the 5 years?

Thank you.

[Guest LSULLIVAN]

Is there a regulation (new or old) that states a non spouse beneficiary must distribute the assets from the deceased retirement account?

If so,

Does this apply to a spouse beneficiary as well?

What happens if the distribution is not made within the 5 years?

Thank you.

I didnt finish my first question. Do the assets have to be distributed within 5 years?

[J Simmons]

If the employee died before distribution began, then yes there is a 5-year rule. This requires payout by Dec 31 of the 5th calendar year following the employee's death. IRC 401(a)(9)(B)(ii) and (iii).

No, this does not apply to the beneficiary if the surviving spouse of the employee. IRC 401(a)(9)(B)(iv).

If distribution is not made to the non-spouse beneficiary within the 5-year rule (nor began over the life of the non-spouse beneficiary by Dec 31 of the year following the employee's death), then the minimum required distributions have not been made (IRC 401(a)(9)) and the entire plan may be disqualified.

Also, there's a 50% penalty tax per IRC 4974(a).

[Guest bmukherji]

Default Rule for Post-death Distributions

http://www.trustsandestates.net/MRDRegs/MR...htm#_Toc9937166

The link above is stating that the "life cycle" rule governs if there is a designated non-spouse beneficiary. Obviously, that is a more desireable position than the mandatory 5 years.

[austin3515]

Don't forget that PPA now allows non-spouse beneficiaries to roll over their balances. This is not without complications, but we can't have a complete discussion about non-spouse MRD's without at least mentioning it!!

If anyone's interested, here is an aweseome write-up by Natalie Choat who is allegedly the kingpin when it comes to MRD's...

http://advisor.morningstar.com/articles/do...2772&pgNo=1